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value based method of accounting for stock-based compensation plans, have
already implemented the prospective method, and other companies should
continue doing so in order to ensure a higher degree of comparability in future.
With regard to disclosure requirements JPMorgan advocates just disclosing
information in footnotes to the financial statements, not showing the expense in
income statement. In the firm's opinion, showing the pro forma effect of
expensing stock options would be sufficient. Moreover, disclosure should be
included in footnotes, not in the "Summary of Significant Accounting Policies."
4.2.6 SunTrust Banks, Inc. 59 SunTrust Banks, Inc. (SunTrust) is one of the U.S. largest commercial banking
organizations. SunTrust's primary businesses include deposit, credit, trust and
investment services. The company provides credit cards, mortgage banking,
insurance, brokerage and capital market services (www.suntrust.com).
SunTrust believes that the introduction of two additional methods of transition
to companies, who voluntarily choose to adopt the fair value based method of
accounting for stock-based employee compensation plans, would cause
inconsistency and incomparability of financial results. The possibility exists
that, e.g., three similar companies in the same line of business, each having a
comparable number of outstanding options, would choose a different method of
transition and show various amounts of stock-based compensation expense. In
addition, the fourth company in the same line of business with a similar number
of outstanding options may choose to apply the intrinsic value based method of
accounting for stock options. Consequently, the results provided by these
companies would be absolutely incomparable. SunTrust emphasizes that more
disclosure itself will not be useful unless there is only one uniform transition
method. In general, the company approves the method proposed in SFAS 123,
namely prospective recognition, as this method in conjunction with new
disclosure requirements will fulfil the goal of providing comparable and
consistent results in financial statements.
4.2.7 Merrill Lynch & Co., Inc.
Merrill Lynch & Co., Inc. (Merrill Lynch) supports FASB's decision to provide
companies with two additional transition methods as it will address the issue of
comparability of reported results. Merrill Lynch especially supports the
continuation of using the prospective transition method. If it is removed, it may
discourage some of the companies from voluntarily adopting the fair value
based method of accounting for stock-based compensation.
Merrill Lynch recognizes the concern of lack of comparability if three
transition methods are allowed. The company's argument is that inconsistency
does exist under current rules and increasing transition choices will hardly
impair comparability any further.
Also, Merrill Lynch turns FASB's attention to the valuation methodology
allowed by SFAS 123. It questions the ability of the Black-Scholes option
pricing model to adequately address the non-transferability feature of options
and therefore accurately measure the expense. The company believes FASB
should revise its provisions on option pricing models and allow more refined
techniques to be used. 60 4.2.8 Microsoft Corporation
Microsoft Corporation (Microsoft) is a leader in manufacturing software and
operating s ystems d eveloping, p roducing a nd s upporting c ompany
Microsoft believes that for the purpose of consistency, only one method of
transition should be available upon adoption of the fair value based method of
accounting for stock-based compensation expense. Though the company agrees
with the requirement to present stock options related disclosure in interim
financial statements, it does not support the suggestion to include disclosure in
the “Summary of Significant Accounting Policies.”
4.2.9 Credit Suisse Group
Credit Suisse Group (CSG) is a world-leading financial services company
providing its clients advice in all aspects of finance around the world
In CSG's opinion, only one transition method should be allowed in order to
ensure consistent expense recognition and, thus, comparability in the income
statements of those companies, which chose to adopt the fair value method in
SFAS 123. CSG suggests that FASB should maintain the prospective transition
approach allowed by SFAS 123. CSG also emphasizes that option pricing
models do not adequately reflect the true economic cost of employee stock
options and therefore recommends FASB to address this issue in the Exposure
CSG considers quarterly disclosure provisions to be excessive. It would not
provide useful information to users of financial statements as most stock-based
compensation awards are granted on a yearly basis. 4.3 Review of Comment Letters Submitted on IASB Discussion
Paper on Share-Based Payments
In this section we will present an overview of Comment Letters submitted to
IASB with regard to the Discussion Paper on Share-...
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- Fall '13